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A hedonic study of the housing market generates the following information:

Base price (BP). The average house has three bedrooms and is five miles from the city center. The price of the average house is $90,000.
Access price (D). The price of housing drops by $1000 for every additional mile from the city center.
Bedroom price (BR). The price of housing increases by $10,000 for every additional bedroom.

Write out the hedonic equation.



Based on the above information; What is the price of a four-bedroom home that is located 6 miles from the city center?




EXAM 2: Economics of Cities

Part Two: Short Answer — Do any 10 of 11— 60 points

We know that housing is a unique commodity because (1) moving costs are relatively high and because (2) racial discrimination and segregation are prevalent in the housing market. List 3 other reasons that make housing unique.





Put the HPF in slope form?






What’s the difference between dwelling characteristics and site characteristics? Give examples of each.





When a property becomes unprofitable the landlord has three options at her disposal. She can board up, convert or abandon the property. When does she employ each of these strategies?







What demand-side housing program has the government put in place to address the housing needs of low-income people? Explain how it works.








Explain the difference between -t/h and -t/(h(x)).







While holding everything else constant, describe the bid rent function for a large household in comparison with that for a small household.







Discuss the elasticity of housing supply.




What are the two basic features of the filtering model?






What is exclusionary zoning? Provide an example.




The winners from rent control are the consumers who manage to get one of the rent-controlled dwellings at the artificially low price. The gains of the occupants are diminished by three responses to rent control. Discuss two of them.


Part Three: ESSAY— 60 points– (ANSWER 2 of 3)

Explain Low Income Housing Tax Credits. What are the designed to do? How do they work?

Explain the difference between the Gautreaux Program and Moving To Opportunity (MTO). What are the policy implications based on the MTO outcomes? (i.e. What should government do in response to these outcomes, if anything?)

What is the major tax break for homeowners? Why does the tax benefit increase with income?


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